Difference between an ETF, ETN and Unit Trust
I want to make sure you understand the difference between an ETF, ETN and a Unit Trust. You want to know what you are investing in right? ETF stands for Exchange Traded Fund (the first ETF was launched in November 2000). ETN stands for Exchange Traded Note. The first Unit Trust was launched in June 1965 (this investment product is so old there is no abbreviation for it lol).
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ETF |
ETN |
Unit Trust |
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One asset class, that tracks an index or basket of shares |
One asset class, that tracks an index or basket of shares |
A basket of different asset classes (equity & bonds) |
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No portfolio manager, passive investments |
No portfolio manager, passive investments |
Managed by portfolio managers, active investments |
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Buy on your equity account through your broker |
Buy on your equity account through your broker |
Buy units through an investment house |
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Very liquid, can be bought and sold like a share |
Not as liquid as ETF’s but can be bought and sold like a share |
Not very liquid, limited buying and selling |
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Costs of equity investing |
Costs of equity investing |
Fees are usually higher |
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Investment in a fund that holds the assets it tracks |
Structured products like a debt note |
Is a form of collective investment constituted under a trust deed |
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Secured, underwriter holds the actual assets it tracks |
Unsecured, if the underwriter of the instrument goes bankrupt, you risk losing it |
Unsecured, if the underwriter of the instrument goes bankrupt, you risk losing it |
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Usually distribute taxable dividends |
No dividends are payable |
Dividends can be paid out or reinvested |
See you soon
Christelle
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